Category:

Dateline:

Revenue increased 6% to $608 million with 11% and 8% growth at
AHS and Terminix, respectively

Net income of $39 million, or $0.28 per share, versus $28
million, or $0.20 per share, a year ago

Adjusted net income(1) of
$47 million, or $0.34 per share, versus $45 million, or $0.33 per
share, a year ago

Adjusted EBITDA(2)
decreased 5% to $127 million from $133 million a year ago

2016 Outlook: Revenue range of $2,750 million to $2,780 million,
or 6% to 7% over prior year, and Adjusted EBITDA range of $675 million
to $690 million, or 9% to 11% over prior year

ServiceMaster
Global Holdings, Inc. (NYSE: SERV), a leading provider of
essential residential and commercial services, today announced unaudited
first-quarter 2016 results. The company reported a year-over-year
revenue increase of 6 percent driven by organic growth at American Home
Shield (“AHS”) and in Terminix’s pest service line as well as the impact
of acquiring Alterra Pest Control, LLC (“Alterra”) on November 10, 2015.

First-quarter 2016 net income was $39 million, or $0.28 per share,
versus $28 million, or $0.20 per share, in the same period in 2015.
First-quarter 2015 net income includes a loss on extinguishment of debt
of $8 million, net of tax.

First-quarter 2016 adjusted net income was $47 million, or $0.34 per
share, versus $45 million, or $0.33 per share, for the same period in
2015.

First-quarter 2016 Adjusted EBITDA was $127 million, a year-over-year
decrease of $6 million, or 5 percent, primarily driven by a $10 million
decrease in Adjusted EBITDA at AHS offset by a $5 million increase in
Adjusted EBITDA at Terminix. The Adjusted EBITDA reduction this quarter
reflects increases of approximately $6 million in technology costs,
primarily investments related to the ServSmartSMinitiative,
$11 million in sales/marketing spend and $10 million of contractor claim
costs at AHS, partially offset by $26 million from the conversion of
higher revenue.

Rob Gillette, ServiceMaster’s chief executive officer, noted, “We
continue to grow and invest in our business with revenue growth
accelerating at both AHS and Terminix this quarter. By investing in
marketing and our ServSmart platform, we are building brand
awareness and developing a technology platform that makes it easy for
our customers to do business with us. With these investments we are
well-positioned for future growth and profitability.”

Consolidated Performance

Three Months Ended March 31,

$ millions

2016

2015

B/(W)

Revenue

$

608

$

571

$

37

YoY growth

6.4

%

Gross Margin

284

268

16

% of revenue

46.7

%

46.9

%

(0.2

)

pts

SG&A

(173

)

(152

)

(21

)

% of revenue

28.5

%

26.6

%

(1.9

)

pts

Income from Continuing Operations before Income Taxes

62

45

17

% of revenue

10.2

%

7.8

%

2.4

pts

Net Income

39

28

11

% of revenue

6.4

%

4.9

%

1.5

pts

Adjusted Net Income(1)

47

45

2

% of revenue

7.7

%

7.9

%

(0.2

)

pts

Adjusted EBITDA(2)

127

133

(6

)

% of revenue

20.9

%

23.2

%

(2.3

)

pts

Free Cash Flow(3)

89

71

18

Segment Performance

Revenue and Adjusted EBITDA for each reportable segment and
Corporate were as follows:

Three Months Ended March 31,

Revenue

Adjusted EBITDA

$ millions

2016

B/(W) vs. PY

2016

B/(W) vs. PY

Terminix

$

364

$

28

$

94

$

5

YoY growth / % of revenue

8.3

%

25.8

%

(0.6

)

pts

American Home Shield

194

19

19

(10

)

YoY growth / % of revenue

10.9

%

9.8

%

(6.8

)

pts

Franchise Services Group

49

(10

)

18

(1

)

YoY growth / % of revenue

(16.9

)

%

36.7

%

5.2

pts

Corporate(4)

1

—

(4

)

—

Total

$

608

$

37

$

127

$

(6

)

YoY growth / % of revenue

6.4

%

20.9

%

(2.3

)

pts

A reconciliation of income from continuing operations to both adjusted
net income and Adjusted EBITDA, as well as a reconciliation of net cash
provided from operating activities from continuing operations to free
cash flow, are set forth below in this press release.

Terminix

Terminix reported an 8 percent year-over-year revenue increase in the
first-quarter of 2016, driven primarily by the impact of the Alterra
acquisition in November 2015 and organic growth in pest service revenue.
Adjusted EBITDA increased 6 percent, or $5 million, versus prior year,
primarily driven by $15 million from the conversion of higher revenue,
offset, in part, by a $4 million increase in technology costs, a $1
million increase in sales/marketing costs and a $5 million increase in
other costs.

American Home Shield

American Home Shield reported an 11 percent year-over-year revenue
increase in the first-quarter of 2016 driven by the growth in the number
of home warranties and price increases. Adjusted EBITDA decreased $10
million versus prior year, primarily reflecting a $10 million increase
in contractor claim costs, a $10 million increase in sales/marketing
costs and a $2 million increase in technology costs, offset, in part, by
$13 million from the conversion of higher revenue.

The increase in contractor claim costs was driven by an increase in the
average cost per service request associated with appliance repairs and
normal inflationary pressure. As of the end of the first quarter, our
utilization of in-network contractors has returned to historical levels.

Franchise Services Group

The Franchise Services Group reported a 17 percent year-over-year
revenue decrease in the first-quarter of 2016 primarily reflecting the
conversion of certain company-owned Merry Maids branches to franchises
and lower sales of products. Adjusted EBITDA decreased 5 percent or $1
million versus prior year, primarily reflecting the flow-through effect
of lower revenue and the branch conversions, offset, in part, by cost
reduction initiatives.

Cash Flow

For the three months ended March 31, 2016, net cash provided from
operating activities from continuing operations increased to $106
million from $68 million for the three months ended March 31, 2015.

Net cash used for investing activities from continuing operations was
$15 million for the three months ended March 31, 2016 compared to $14
million for the three months ended March 31, 2015.

Net cash used for financing activities from continuing operations was
$17 million for the three months ended March 31, 2016 compared to $190
million for the three months ended March 31, 2015.

Free cash flow(3) was $89 million for the three months ended
March 31, 2016 compared to $71 million for the three months ended March
31, 2015.

Other Matters

U.S. Virgin Islands

As previously disclosed, the company entered into a plea agreement in
connection with the investigation by the United States Department of
Justice with respect to the incident in St. John, U.S. Virgin Islands.
To date, the company has recorded charges of $10 million in connection
with the plea agreement, of which $2 million was recorded in the
first-quarter of 2016. At an initial appearance on April 20, 2016, the
United States District Court of the U.S. Virgin Islands rejected the
plea agreement, indicating that it was not satisfied with the assessment
and distribution of the monetary sanctions set forth in the plea
agreement. The United States Department of Justice and the company
continue to discuss the matter, including potential modifications to the
plea agreement. The court scheduled a sentencing hearing on August 25,
2016 and indicated that a modified plea agreement could be filed up to
that date.

2016 Investor Day

The company will hold an Investor Day on Tuesday, May 17, at the Waldorf
Astoria Hotel, 301 Park Avenue, New York City. Rob Gillette, Chief
Executive Officer, and members of executive management will provide an
overview of the company’s strategic plan, including ServSmart,
the company’s approach to combining technology with its unmatched
service network of trusted professionals. To register for the event,
please visit the company’s investor
relations home page.

For those unable to attend in person, a live streaming of the event will
be available beginning at approximately 8:00 a.m. eastern time on
Tuesday May 17, 2016. To participate, visit the company’s investor
relations home page. A replay will be available on www.servicemaster.com
under Investor Relations following the event.

Full-Year 2016 Outlook

Revenue is expected to range from $2,750 million to $2,780 million, or
an increase of 6 percent to 7 percent compared to 2015. Adjusted EBITDA
is expected to range from $675 million to $690 million, or an increase
of 9 percent to 11 percent compared to 2015.

First-Quarter 2016 Earnings Conference Call

The company will discuss its first-quarter 2016 operating results during
a conference call at 8 a.m. central time (9 a.m. eastern time) today,
May 4, 2016. To participate on the conference call, interested parties
should call 888.225.2695 (or international participants, 303.223.4364).
Additionally, the conference call will be available via webcast. A slide
presentation highlighting the company’s results and key performance
indicators will also be available. To participate via webcast and view
the slide presentation, visit the company’s investor
relations home page.

The call will be available for replay until June 4, 2016. To access the
replay of this call, please call 800.633.8284 and enter reservation
number 21809467 (international participants: 402.977.9140, reservation
number 21809467). You may also review the webcast on the company’s investor
relations home page.

About ServiceMaster

ServiceMaster Global Holdings, Inc. is a leading provider of essential
residential and commercial services, operating through an extensive
service network of more than 8,000 company-owned locations and franchise
and license agreements. The company’s portfolio of well-recognized
brands includes American Home Shield (home warranties), AmeriSpec (home
inspections), Furniture Medic (furniture and cabinet repair), Merry
Maids (residential cleaning), ServiceMaster Clean (janitorial),
ServiceMaster Restore (disaster restoration) and Terminix (termite and
pest control). The company is headquartered in Memphis, Tenn. Go to www.servicemaster.com
for more information about ServiceMaster, or follow the company at twitter.com/ServiceMaster
or Facebook.com/ServiceMaster.

Information Regarding Forward-Looking Statements

This press release contains forward-looking statements and cautionary
statements, including 2016 revenue and Adjusted EBITDA outlook. Some of
the forward-looking statements can be identified by the use of
forward-looking terms such as “believes,” “expects,” “may,” “will,”
“shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is
optimistic,” “intends,” “plans,” “estimates,” “anticipates” or other
comparable terms. Forward-looking statements are subject to known and
unknown risks and uncertainties, many of which may be beyond our
control, including, without limitation, the risks and uncertainties
discussed in the “Risk Factors” and “Information Regarding
Forward-Looking Statements” sections in the company’s reports filed with
the U.S. Securities and Exchange Commission. We caution you that
forward-looking statements are not guarantees of future performance or
outcomes and that actual performance and outcomes, including, without
limitation, our actual results of operations, financial condition and
liquidity, and the development of the market segments in which we
operate, may differ materially from those made in or suggested by the
forward-looking statements contained in this press release.

Additional factors that could cause actual results and outcomes to
differ from those reflected in forward-looking statements include,
without limitation, lawsuits, enforcement actions and other claims by
third parties or governmental authorities; compliance with, or violation
of environmental health and safety laws and regulations; 401(k) Plan
corrective contribution; the effects of our substantial indebtedness;
changes in interest rates, because a significant portion of our
indebtedness bears interest at variable rates; weakening general
economic conditions; weather conditions and seasonality; the success of
our business strategies, and costs associated with restructuring
initiatives. The company assumes no obligation to update the information
contained herein, which speaks only as of the date hereof.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures.
Non-GAAP measures should not be considered as an alternative to GAAP
financial measures. Non-GAAP measures may not be calculated or
comparable to similarly titled measures used by other companies. See
non-GAAP reconciliations below in this press release for a
reconciliation of these measures to the most directly comparable GAAP
financial measures. Adjusted EBITDA, adjusted net income and free cash
flow are not measurements of the company’s financial performance under
GAAP and should not be considered as an alternative to net income or any
other performance measures derived in accordance with GAAP or as an
alternative to net cash provided by operating activities or any other
measures of the company’s cash flow or liquidity. We believe these
non-GAAP financial measures are useful for investors, analysts and other
interested parties as it facilitates company-to-company operating and
financial condition performance comparisons by excluding potential
differences caused by variations in capital structures, taxation, the
age and book depreciation of facilities and equipment, restructuring
initiatives, consulting agreements and equity-based, long-term incentive
plans.

_________________________________________________

(1) Adjusted net income is defined by the company as income from
continuing operations before: amortization expense; 401(k) Plan
corrective contribution; restructuring charges; gain on sale of Merry
Maids branches; loss on extinguishment of debt; other expense; and the
tax impact of all of the aforementioned adjustments. The company’s
definition of adjusted net income may not be comparable to similarly
titled measures of other companies.

(2) Adjusted EBITDA is defined as income from continuing operations
before: depreciation and amortization expense; 401(k) Plan corrective
contribution; non-cash stock-based compensation expense; restructuring
charges; gain on sale of Merry Maids branches; provision for income
taxes; loss on extinguishment of debt; interest expense; and other
non-operating expenses. The company’s definition of Adjusted EBITDA may
not be comparable to similarly titled measures of other companies.

(3) Free cash flow is defined by the company as (i) Net Cash Provided
from Operating Activities from Continuing Operations before: call
premium paid for retirement of debt; (ii) less property additions.

(4) Corporate includes The ServiceMaster Acceptance Company Limited
Partnership (SMAC) and the unallocated expenses of our headquarters
function.